Risk is more important than returns. Portfolio returns are at the mercy of the market as a whole. Everyone in the financial crisis got hit especially the big institutions. The lesson they took from this is to focus more on managing investment risk. It doesn’t matter if you have good returns and you lose them all the next year.
I had the pleasure of interviewing Steven Nuckols. Steven is the president and founder of Wealth Compass Financial. Steven started in finance as an analyst and his findings were published in financial journals such as Seeking Alpha, The Street, and MarketWatch. Steven then moved into financial planning to work directly with clients. Steven was hired by an independent money manager to create and develop a financial planning division. In this capacity Steven worked with clients with a wide range of financial situations. He then took this experience to build Wealth Compass Financial. Steven got his BA in Russian with a minor in Business from Brigham Young University. He and his wife, Brenna, live in Carlsbad, CA and have 2 daughters — Avery and Sloan.
Thank you for doing this with us! Our readers would like to learn a bit more about you. Can you tell us the “backstory” about what brought you to the finance industry?
I got into finance because I had an amazing economics professor in college. His class really made me interested in how the study of finance and economics can explain so much about how the world works. My move into personal finance came quickly because it has such real and personal consequences. It was hard to get excited about numbers on a page until I could see what they meant to a client’s family and legacy.
Can you share with our readers the most interesting or amusing story that occured to you in your career so far? Can you share the lesson or take away you took out of that story?
One story that sticks out to me is a meeting I had with someone who didn’t become a client. I went through their budget with them and found that they had leftover income we could put to good use. In our follow up meeting, I wanted to put forward some ideas of what to do with that extra monthly cash. They then informed me that they bought a new luxury car when I told them they had some extra money. It was a silly decision, but was also an interesting example of how human nature can work against our best interest.
Are you working on any exciting new projects now? How do you think that will help people?
I am working on rolling out a podcast, Youtube channel, and regular webinars. I currently put on in-person retirement seminars, but I am excited to translate the useful retirement, tax, and investment information into these digital platforms.
Ok. Thanks for all that. Let’s now jump to the main core of our interview. According to this report in Fortune, nearly two-thirds of Americans can’t pass a basic test of financial literacy. In your opinion or experience what is the cause of these unfortunate numbers?
That doesn’t surprise me at all. Children are being thrown into adulthood with no real education in saving, investing, taxation, credit, or even how to pay bills. Once we move out on our own, we are just expected figure these things out.
If you had the power to make a change, what 3 things would you recommend to improve these numbers?
We need to be educating our children on the ins and outs of personal finance. This should start in the home from a young age. First, parents can start with their young children by teaching AND SHOWING them about saving and build to investing, debt, bills, etc. as they get older. Secondly, personal finance should be part of school curriculum. Our schools focus on preparing our children for college, but it is just as important to prepare them for life. Lastly, we need a cultural change. Our culture is very uncomfortable talking about personal finances. If we were more open about our financial picture, we could get more help and guidance from our family and peers.
Ok, thank you! Now to the main question of our interview: You are a “finance insider”. If you had to advise your adult child about 5 non intuitive essentials for smart Investing what would you say? Can you please give a story or an example for each.
1 The fun stuff comes last. When I sit down with a new client they want to talk about growing their portfolio, but they have to bulletproof your portfolio before they can grow it. My first meeting always consists of rewriting a client’s priorities so they can build a strong financial foundation first.
2 Winners don’t stay on top The first things people ask me when they hear I am a financial advisor is what I think the market is going to do and if I have any hot stock tips. The funny thing is that no matter what I tell them, I’ll be wrong in 6 months. Predicting the future is not my job; preparing for it is.
3 Risk is more important than returns Portfolio returns are at the mercy of the market as a whole. Everyone in the financial crisis got hit especially the big institutions. The lesson they took from this is to focus more on managing investment risk. It doesn’t matter if you have good returns and you lose them all the next year.
4 Returns come from asset allocation This is counterintuitive for most people. This is part of the mindset reframing I have to do with my clients. A novice investor may think: “this investment is doing well so I’m going to hang onto it.” But that is not the best way to invest. Having a broad asset allocation and keeping it balanced is key. When the allocated portfolio gets out of balance, you sell off the winners (take your winnings) and buy the losers (at a discount because they are not CURRENTLY performing well). This keeps your portfolio balanced and keeps you invested in a broad array of investments.
5 The wisdom of the crowd What do you know that teams and teams of analysts on Wall Street don’t already know? Can you make trades faster than a computer? Do you have insider information? If your answer is no, then you’re not going to find “the winner.” Market prices are a product of all of the information that is out there, and there is so much information that those prices are very, very accurate. I work with very smart and successful people. They have gone their whole life being able to do better than their peers, but they can be very successful investors if they trust this concept.
None of us are able to achieve success without some help along the way. Is there a particular person who you are grateful towards who helped get you to where you are? Can you share a story about that?
This is an easy one. Parents: both my wife’s and mine. There is no way I could have even taken the risk of starting a business without the support and help of my in-laws and my parents. From helping me with my business plan to coming up with the name of my business to letting us move in with them so I could pump all of our savings into the business. Starting a business is a grind, and you go without a paycheck for a while. I couldn’t have done it without them.
Can you please give us your favorite “Life Lesson Quote”? Can you share how that was relevant to you in your life?
I stole my wife’s favorite quote: “It’s nice to be important, but it’s more important to be nice.” I have come to realize that no matter what you accomplish or earn in your lifetime doesn’t have much relevance once you are gone. The only thing you can leave behind is the impact you have had on people and the relationships you’ve built.
Thank you for all of these great insights!